Treasury Rates: July 21st, 2022

Daily changes in the US 10 Year Treasury rates are the blue bars while the red line is the 14-day cumulative change in rates: 10bp decrease. Note the up & then down in rates--uncertain market. For the blue bars, it is unusual to have changes of greater than 0.10 in a single day and 0.20 is VERY unusual.


 

In the past 2 weeks, 1-month rates increased from 1.55% to 2.15%----HUGE. With this past week’s monthly new jobs AND the CPI coming rising to 9.1% it all but assures the Fed will increase the Fed Funds rates by 75bp or possibly 100bp---thus short-term rates rose. Fed next meets on July 27.


The Yield Curve for short terms is VERY steep while the longer term (5+ years) is inverted. Could we be in for a short-term period of stagflation? It will take at least 12 months for the Energy Prices to “fall” out of the CPI 12-month rolling calc. In the meantime, we can have a slowing economy with higher interest rates while the Fed fights inflation. This is what an inverted yield curve is pointing to.


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